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Tax Tips for Short Sales and Foreclosures

If your mortgage debt is partly or entirely forgiven during tax years 2007 through 2012 due to short sale or foreclosure, you may be able to claim special tax relief and exclude the debt forgiven from your income. Here are 10 facts the IRS wants you to know about Mortgage Debt Forgiveness due to short sale or foreclosure.

1. Normally, debt forgiveness due to short sale or foreclosure results in taxable income. However, under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude up to $2 million of debt forgiven on your principal residence.

2. The limit is $1 million for a married person filing a separate return.

3. You may exclude debt reduced through mortgage restructuring, as well as mortgage debt forgiven in a foreclosure.

4. To qualify, the debt must have been used to buy, build or substantially improve your principal residence and be secured by that residence.

5. Refinanced debt proceeds used for the purpose of substantially improving your principal residence also qualify for the exclusion.

6. Proceeds of refinanced debt used for other purposes – for example, to pay off credit card debt – do not qualify for the exclusion.

7. If you qualify, claim the special exclusion by filling out Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, and attach it to your federal income tax return for the tax year in which the qualified debt was forgiven.

8. Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the tax relief provision. In some cases, however, other tax relief provisions – such as insolvency – may be applicable. IRS Form 982 provides more details about these provisions.

9. If your debt is reduced or eliminated you normally will receive a year-end statement, Form 1099-C, Cancellation of Debt, from your lender. By law, this form must show the amount of debt forgiven and the fair market value of any property foreclosed.

10. Examine the Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. You should pay particular attention to the amount of debt forgiven in Box 2 as well as the value listed for your home in Box 7.

Homeowners who participated in short sale or had their real estate property foreclosed, take full advantage of the tax benefits available to you and pay no taxes on forgiven debt.

Interested in more? Read about every single rental property tax deduction from TReXGlobal Property Management Software !

Is Your City in the List of Bottom Real Estate Markets?

According to Builder magazine the real estate markets that have been hit the hardest will take the most time to recover. They did a study of all the real estate markets in USA to determine which ones are the weakest. The real estate markets that appear on this list have had the most job losses, increasing foreclosures and falling home prices.

The real estate markets were ranked based on population trends and job growth, perennial drivers of housing demand. Builder magazine also examined the rate of home price declines. The other factors considered by the magazine included the rate of building permits, which they consider to be the single best ongoing indicator of builder confidence in a market. They combined all these factors to rank the markets with a score.

The bottom 5 markets in USA are:

1. Detroit, Michigan

2. Stockton, California

3. Port St. Lucie, Florida

4. West Palm Beach, Florida

5. Daytona Beach, Florida

Check the list to see which real estate markets are likely to recover last from the real estate downturn. Click Here

Read More at our Property Management Blog, and be sure to try out the World's Easiest Property Management Software!

Time for a Much Needed Vacation!

I haven't blogged in a while, but now ends right now! I am so excited I can't contain myself! Why?

I am finally going on vacation!

Now I know what you are thinking, Summer is just about over, what is this guy on, right?

Well, to tell you a little more about myself - it's been a long time since I've taken a break for vacation (over 3 years, when my journey at TReXGlobal first began!).

As the Director of Community Relations for TReXGlobal.com, the maker of super cool Property Management Software - there are quite a few things that I am involved with - like our amazingly awesome partner program, and the free monthly newsletter that real estate professionals use to keep in touch with their clients.

As the season comes to an end, I can't help but think about all the cool things that have happened over the last couple months. Our blog has grown a lot since we began in April. I finished my MBA in June and landed in the newspaper, that was nice! A few weeks later Inman News did a wonderful review of our products, that was really cool.

So what is the coolest thing about Summer? I haven't been away from a laptop more than a couple hours in the last three years, and now I am going to Fiji for a month! Ya, that's going to be nice... looking forward to beautiful sights and some wonderful R&R!

Work hard, and play harder. Those are words I like to live by :)

The FIGHT to get MY Name Back

It was a Friday evening at 8:59PM when I suddenly remembered Facebook was giving away vanity URLs in one minute. I assumed the demand for facebook.com/niman wouldnâ€™t be very high, so I let my friend Katherine go first (she was lucky, she got facebook.com/katherine). Claiming facebook.com/Niman was pretty easy, since my only competition for claiming that name is Bill/Nicolette Niman (Niman Ranch), and Henry Niman (swine flu guy).

A few weeks later, I noticed a lot of folks had matching vanity URLs for Facebook, Twitter and Linkedin. I had 2 out of 3 (facebook.com/niman and twitter.com/niman) so I decided I should also get my LinkedIn URL. So then I go to LinkedIn to claim /Nimanâ€¦ AND I AM NOT ABLE TOâ€¦. The first thought I had to myself was â€œDarn it, some other Niman beat me,â€ and I just had to see who it was. When I found out who it was, I went nuts!

As it turned out, it was someone named Nima. I started thinking to myself â€œWhy did Nima have to take /Niman when he could have taken /Nima,â€ and I decided Nima would just have to give up that URL!

Then I began writing to Nima. It started off as an angry letter, demanding that Nima change his URL to /Nima so I could claim /Niman. It ended up turning into a really nice and compelling email pleading for his humble graciousness. Then, right before I could send the email, I realized I couldnâ€™t send it!

LinkedIn has a 5 character minimum. Nima doesnâ€™t have /Nima, because he canâ€™t. He took /NimaN, because his last name starts with â€œNâ€

NNNNNNNNNNOOOOOOOOOOOOOOOOOOO!!!!!!!!!! I thought to myselfâ€¦.. Now I canâ€™t tell him to change his URL, because I donâ€™t have a reasonable suggestion for what he can change it to!

At this point, I am suddenly back to where I started, and angry at the world because by now this had consumed over an hour of my life.

Then I started to laugh about it. I started thinking to myself about how much this stupid URL was messing with my mind. I decided that this story was just too funny to remain untold, and that I had to share it with someone. Who do you think I chose? You guessed it!

And now, the pleasant surprise: He did it! My name is mine now! linkedin.com/in/niman

So what is the moral of the story?

Many things in life will not land in your lap, and you need to be proactive if you want something to go your way. As I reached out to a complete stranger, I was truthful, humble, and I had no problem with humiliating myself. In return, he did me a huge favor, and Iâ€™m sure it made him feel good to do so.

Can you do the same with your clients? How do you reach out to real estate investors? A lot of people seem to have forgotten what a real life conversation can still accomplish these days.

My suggestion: Co-Brand free real estate tools for your clients, send monthly newsletters to your prospects, and tell them about your Property Management Software !

Investors Chomping through the Backlog - Keep Feeding Them!

The recent changes in mortgage rules are certainly helping investors get back in to the market. Fannie Mae had previously limited investors by allowing them to finance only up to four properties, regardless of whether they had money for a down payment, and perfect credit. Ever since March, the limit was increased from 4 to 10.

An article in FloridaToday describes how this has changed the real estate climate. Scott Bray, vice president of residential lending for AmeriBest Mortgage in Satellite Beach, said in the article that before the limit was raised, he would take one or two calls a week from investors who wanted to refinance a property or buy a new rental house. Ever since the limit had been imposed, if an investor owned more than four properties, they couldn't add a new mortgage or refinance a current one.

Dick and Ginny Pugh had begun their real estate investing career 8 years ago and Dick had worked 33 years as an airline pilot. The couple never had a problem getting a loan until December 2008 when they found a home that they liked but could not get financing. Luckily, they were able to take out a HELOC and buy the rental with cash.

You may have noticed a large number of cash deals for homes under $100,000 between September and February – these were probably investors who weren't able to finance the properties, but couldn’t afford to pass up the great deals. Sales for those months probably would have been higher if the four-property limit hadn't been in effect – and not allowing investors to chomp through the backlog of foreclosures has been hurting our markets.

The current markets are an investors’ playground, and serving to the needs of this segment is the key to improving the housing market. What kind of tools are you using to help serve investor clients?

Agent Lays the SmackDown on the IRS

Many of you have heard about how the IRS has been targeting Real Estate Agents, and challenging the status of a "real estate professional" for an Agent.

To give you a brief background without getting into the details - a "Real Estate Professional" is someone who "materially participates" in their real estate activity. As a result, they are able to deduct real estate losses from other income that is not related to real estate.

The IRS had been challenging the "real estate professional" status for agents - stating that Brokers qualify, but Agents do not. And they were winning...

The great news is that a Real Estate Agent just won in tax court! Read the case for yourself!

The IRS tried to argue that the taxpayer needs to be a “Broker” not a just an “Agent” to meet the 750 hour per year material participation test. The Tax Court said: “The Court concludes that Congress is presumed to have defined the term “brokerage” in its common or ordinary meaning. The Court also stated that for purposes of section 469, the “business” of a real estate broker includes, but is not limited to: (1) Selling, exchanging, purchasing, renting, or leasing real property” and therefore, an “agent” is the same as a “broker” for purposes of this test.”

Yippy!